4 major CRC Producers in Malaysia purely based their financial results & cash flows performance.
The 4 CRC producers' yearly production capacity: 1. CSC Steel Bhd (620,000 tonnes) 2. Mycron Steel Bhd (260,000 Tonnes) 3. YKGI Bhd (220,000 Tonnes) 4. EonMetal Group Bhd (120,000 tonnes)
And the utilisation of the capacity are as follows: 1. CSC Steel Bhd (64.5%) 2. Mycron Steel Bhd (78.1%) 3. YKGI Bhd (54.5%) 4. EonMetal Group Bhd (20.8%)
Welcome moneysifu. I only can paste the graph yest coz my company have blocked the access. Daty i have limitation time to paste the graph with latest crc price. Fuyoh crc 3621rmb equal to rm2280. I believe crc will ramp up their ulitisation (current 64.5%) as the price crc now is attractive.
Moneysifu hope it break the second resistance 2.25 Bear in mind pressmetal front runner pe now is 18.
i will estimate the eps for the 3q2016 at around 6 cents as the3 quarter is traditionally the weakest quarter of the year due to long holidays. also, the total benefit from megasteel closure will only come in after 3-4 months.
long term investors will fully benefit the impact from megasteel closure and anti dumping ruling from the 4q onwards. the 4q2016 result will provide a clear picture what will csc normal operating profit margin.
i believe csc will not used the above 2 advantages to make abnormal profit at the expense of their customers as abnormal profit will not last. csc is known in the market as a reliable supplier of quality cold roll coil.
the 4q2016 result will be out in feb 2017. assuming(conservative) for the final 2 quarter of this year, CSC EPS total 14 sen with average of 7 sen per quarter.
with that 2017 EPS will be around 28 sen. csc had a record of good dividend paymaster.
the questions are; 1) at what PE will market price CSC after the 2016 full year report is out next feb together with their generous dividend which had always above FD rate except for last last year. CSC will easily price above RM3 if market price it at PE of 14 and above. 2) the full effect of anti dumping will start to flow in the last quarter of this year as all ruling takes time to show the benefits. therefore, long term investorswhom believe the above should not sell too early.
moneysifu and sifu ooi teik bee, with a level playing field ahead for CSC to do business for the next 5 years, what PE is reasonable for CSC? hopefully both of you can share ....
If US or Europe impose Anti Dumping on China product and CSC get ready for export, then sky is the limit for CSC. Choo Bee is already mulling the possibilities of export.
Personally, I do not think that USD will be strong. Too strong USD is a major concern in US, US government will not want a strong USD. If USD is strong, sale will be affected a bit because of China. It is only my personally opinion. Thank you.
"If US or Europe impose Anti Dumping on China product and CSC get ready for export, then sky is the limit for CSC. Choo Bee is already mulling the possibilities of export."
US has already slapped tariff against Chinese CRC.
Hi Moneysifu, i obtained the CRC price since 2014 from article shared by wealthwizard part 3. It stated the source analysis from mycron's annual report.
Price of CRC & competition among CRC producers in Malaysia Table 3: Average CRC Selling Price in Malaysia
TABLE HERE (I CANT PASTE)
Source: Analysis from Mycron's Annual Reports
Explanation: As refer to Table 1, price of China CRC has been increased from RM1,825 (3/7/2016) to RM2,138 (10/9/2016), an increase of RM313 (using conversion rate of RM1 = RMB1.63)
For quarter ended 30/6/2016, the average CRC price in Malaysia was estimated at RM2,059.
Currently, CRC products was said to have transacted at range of RM2,150 - RM2,200, due to
Without all sifu like moneysifu, probability, wealthwizard, smartrader2020, otb and kyy, i not able to come out this article. The most important is sharing and earning together.
Good analysis but seriously concerned with how valuation is done. If you did a DCF, over half of the value lies in terminal value, and some between 5-10 years. The market even though is a beauty contest in short term, but nonetheless a weighting machine in long term.
On the basis where majority value of a business is derived from 5 years and beyond to terminal, how does PE 10 play a role? Unless you are confident CSC deserve that PE level for next 10 years and beyond, that it would be valid, but you're applying it to 4 recent quarters, or one year. And how does one define PE 10 as conservative? on what basis? Something to think about. If on the basis of 10% discount rate, that PE aint conservative with the return on capital CSC got over past 5 years; if based on future forecast that ROC will fly to 15% and stay there for 10 years, that is truly conservative. Had any steel co achieve 15% ROC over 10 years? Something to think about.
My alternate view is given that valuation is driven by profitability, which in turn driven by steel price, which is affected by countries policies, macro economics, currency movements and so on. Let's say you're fairly confident you can get 80% for each of these main things correct, what's your chance of being right? 0.8 x 0.8 x 0.8 = 51%
Now you have an outside side that you're dealing with something that is as complex as forecasting next month's weather, 50% is a good starting point, and you start incorporate inside view like megasteel closure, tariff, these and that, you might increase your probability of being right to 60% or 70%.
Thanks again, wealthwizard, smartrader2020 and now, Chelsea. On PE, OTB suggests PE of 12-15x in a strong cycle of a highly cyclical industry? Btw, CSC's oft quoted utilisation of 64.5% is historical. I understand it's around 80% since Q2/16.
As you have mentioned somewhere that market is part art part science, sometimes % is just a general calculation for chance, it does not guarantee anything.
See the one who died on the dental clinic, no one expected that but it just happened this way.
When it is too relying on % to make investment, it will divert the attention from looking at the bigger picture.
I believe most successful businessmen are taking risks on their daily business decisions, after calculating all risks & rewards.
That's the job of accountants to advise. That's the reasons most accountants are working for businessmen.
Yea you're right, one needs to have a good grasp of the magnitude and frequency of both upside & downside. All business looks at the bigger picture, the story or narrative ie. let's move into adjacent market, expand etc, but ultimate they have to simplify it to a yes or no answer to go ahead. How do they do that, most use net present value NPV, by calculating capital outflow on year 0 (present) and cash inflow from the investment return every year after for say, 10 years. NPV applies the same principle as DCF.
Ricky, thank you for reply, we as investors are always handicapped when come to investment in stock markets.
Most people don't realise that many of us have to rely on all information made available via newspapers, announcements & reports from the management and we have to rely on the credibility of the those so called directors, even though we know that many of them are having low morale.
All calculation/methods are merely tools used to reduce the risks of making mistakes but these are not decisive when come to share investment. People is still the key factor.
KLCE King, Yes, you are right, beside looking at the figure, you have to look at chair person and the management team. For CSCsteel so far very reliable
Tools are not be all end all. You're right the person using the tool is the key. Anyone can manipulate a tool to work the way he wants, PE 10 would win the most abused tool in financial industry hands down.
If a person choose to be ignorant, no tools save that man, not even Thor's hammer. And look at this page, how many people is expressing constraint and thread carefully? None.
From the spread alone, 13jun RMB457 12sep RMB752 difference is RMB295 equivalent to RM183/ton which is the figure CSCstel capable of making profit for coming quarter. Taking 70% capacity utilization, coming quarter CSCsteel will able to produce 108500 ton. The equivalent additional profit should be 19.8 millions or EPS 5.2 sen If average of EPS is assumed with additional profit, the next quarter EPS should be 9.35
aiya Ricky...if i am sure about the near term earnings...whats the harm in giving PE 10? Its kinda useful when you estimate your rewards giving a dividend payout of say 50%....
and in no way anyone can predict correctly long terms returns.... if one is to really use the correct-realistic figure...i dont see why they should use a figure more than the GDP growth rate of say 4% only...as the ROC itself....unless they have the ability to make an in-depth analysis of the business...and its long term competitive advantage. Who can do that?
I think 99% investors cant...and they are not interested also...furthermore what certainty we have on the long term returns?
...the uncertainty builds up exponentially the longer - your 'time frame' of estimates.
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
moneySIFU
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Posted by moneySIFU > 2016-10-18 12:14 | Report Abuse
Good effort to share your findings, Well Done, Chelsea.